Going Backwards

On the surface, it looked like one of those trends that would continue forward. As the ag retail industry entered the 21st century, one of the major buzzes among market watchers was the rapid rise of post-patent products and their eventual impact on the basic suppliers. Indeed, some analysts such as Harvest Consultant and Mike Buckley & Associates were speculating that by the end of 2007, post-patent products would make up approximately 80% of total crop protection product sales.

Given these projections for growth, CropLife® magazine was curious. Be­ginning with the 20th anniversary of our CropLife 100 survey in 2003, we started asking how many ag retailers within the CropLife 100 rankings were doing business with post-patent manufacturers. The numbers were incredible — 75% were, at that point. Through 2006, this percentage continued to climb — from 81% in 2004 to 86% in 2006.

Even more impressively, many of these same retailers viewed post-patent products as one of the major reasons for their crop protection product business spiraling downward in terms of profit margins. “The high percentage of generic product entries is causing price erosion,” wrote many a respondent on their CropLife 100 survey forms between 2003 and 2006.

Despite this fact, retailers continued to sell an increasing number of these products to their grower-customers without fail. The reason for this boiled down to one of giving the customer what he or she wanted. “Growers are no longer necessarily asking for brand names in their crop protection choices,” said Dave Coppess, vice president of sales and marketing for Heartland Co-op, West Des Moines, IA, in a 2005 interview with CropLife. “All they really want is a product that will help them get clean fields.”

A Bump In The Road?

Based upon this growth curve — coupled with the initial estimates for overall post-patent product market share — our staff expected the 2007 CropLife 100 survey to show post-patent product market penetration nearing the 90% mark, but certainly no lower than somewhere in the 80% range.

Surprisingly, this wasn’t the case. According to data from respondents, the percentage of CropLife 100 retailers doing business with post-patent products fell significantly last year — down 20% to 66%. Furthermore, market analysts expecting post-patent products to be the equivalent of 80% of total crop protection sales were way off the mark. Based upon the CropLife 100 data, generic brands represented only 22% of crop protection product revenue in 2007 among all ranked dealerships. There were, however, several CropLife 100 retailers with post-patent product percentages in the 50% to 60% range. One retailer even indicated that 75% of its 2007 crop protection product sales were generic.

Of course, these kinds of numbers beg a simple question — is the bloom off the post-patent rose? Not to be cliché, but the answer seems to be yes and no.

On the 2007 CropLife 100 survey form, we asked retailers a couple of follow-up questions regarding their post-patent product offerings. As for why these respondents are doing business with post-patent manufacturers when they perceive these products as “negatively impacting” their bottom lines, 72% indicated their grower-customers were “demanding” generics as an alternative to basic manufacturer supplied brands. Perhaps more surprisingly, 80% of those surveyed said that post-patent products offered a better opportunity for profit than basic manufacturer brands did.

While CropLife 100 retailers seemed pleased overall with the post-patent products themselves, the same couldn’t be said for the manufacturers of these brands. According to the survey, only 48% of the respondents said they “trusted” the generic companies with whom they do business. Interestingly, this is the same percentage of respondents that ranked the basic suppliers they do work with as “solid.”

Although it wasn’t reflected by a direct question within the survey, another reason for this sharp drop in post-patent product support among 2007 CropLife 100 retailers could stem from the companies themselves. After relative stability between 2005 and 2006 in terms of which ag retailers made the rankings, 2007 saw six new companies enter the list because of mergers and consolidations among existing players. Compared to the companies that vacated the CropLife 100, virtually none of the newcomers survey forms indicated that they handled post-patent products in their operations, thus depressing the overall percentage figure.

Making A Comeback?

Moving forward, the question now centers on if the 2007 post-patent product performance is a momentary pause on the road to prosperity or a reversal of fortunes. Based upon the evidence, it could be the latter. According to the 2007 CropLife 100 survey, 83% of respondents said that despite their grower-customers asking for generic products, they preferred to sell basic manufacturer brands instead. Of this group, 36% indicated they felt “strongly” about this business position.

Coupled with this view, basic manufacturers have apparently stepped up their efforts to protect their market shares within the ag retail community. This has included offering increased support and upgraded product offerings.

In his 2005 interview with CropLife, Heartland’s Coppess foresaw this kind of scenario playing out in the years ahead. He even predicted that today’s somewhat split marketplace would occur. “The branded folks will try to protect their market share at all costs, post-patent products will keep coming, and retailers will look to improve their bottom lines,” he said. “Eventually, a balance will be achieved.”

Leave a Reply

CropLife 100 Stories

CropLife 100CHS To Build $3 Billion Fertilizer Plant In North Dakota
September 5, 2014
The fertilizer plant in Spiritwood will be the single largest investment in CHS history, as well as the single largest private investment project ever undertaken in North Dakota. Read More
CropLife 100BRANDT Acquires Lemon Ag Services
August 4, 2014
The acquisition of Lemon Ag fits BRANDT’s aggressive corporate strategy of providing superior agronomic advice and services for customers in central Illinois. Read More
CropLife 100Wilbur-Ellis To Relocate Agribusiness Division To Denver
July 16, 2014
The move Eastward will allow Wilbur-Ellis’ Agribusiness Division to be more accessible to relevant geographies and is expected to enhance communication and collaboration among the division’s nearly 3,000 employees. Read More
CropLife 100Map: Pinnacle Agriculture Holdings Acquisitions In 2014
May 29, 2014
Pinnacle Agriculture Holdings continues to expand its agricultural retail distribution business through these key acquisitions in 2014. Read More

Top 100 Articles

CropLife 100CHS: Driving Momentum To Help Farmer-Owners Grow
December 11, 2014
CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, must capture new opportunities to Read More
CropLife 100BRANDT, Verdesian Ink Distribution Agreement
December 9, 2014
The agreement grants BRANDT the exclusive right to sell and market Verdesian’s patented Steric chemistry in the Turf and Ornamental and eastern U.S. ag markets under the BRANDT Reaction product line name. Read More
CropLife 100CropLife 100: The Colors Of Custom Application
December 5, 2014
Although many color spray rigs are in the yards of the nation’s top ag retailers, the majority of them still come in only a few shades. Read More
CropLife 100Pinnacle Invests In Meridian Agriculture Distribution
December 4, 2014
Meridian will provide retailers with supplier-branded products and numerous opportunities to differentiate themselves from their competitors. Read More
CropLife 100CropLife 100: Entering A New Seed Era
December 4, 2014
The seed category has been re-vitalized during the past few years, and more good news (and varieties) are headed the industry’s way in 2015. Read More
CropLife 100CropLife 100: The Depressed State Of Fertilizer
December 3, 2014
Following downright giddy growth earlier this decade, fertilizer sales have fallen back down to earth the past two years. Read More

Latest News

Seed/BiotechKaren Arthur Joins AgriThority As Seed Treatment Produc…
December 19, 2014
Prior to joining AgriThority, Arthur directed research and development programs, overseeing laboratory and field research, to build the Valent U.S.A. seed treatment portfolio. Read More
EquipmentJohn Deere To Sell Crop Insurance Business
December 19, 2014
Deere & Co. has reached a definitive agreement to sell its crop insurance business, subject to regulatory approval, to Farmers Mutual Hail Insurance Co. of Iowa. Read More
Crop InputsNufarm Fills Regulatory VP Position
December 18, 2014
Nufarm announced today that Rob Schwehr has been promoted to the position of Vice President of Innovation & Regulatory Affairs for Nufarm Americas. Read More
Seed/BiotechReport: China Approves Viptera Corn, U.S. Officials Awa…
December 17, 2014
Chinese authorities have informed some agriculture industry officials the government has approved U.S. imports of a type of genetically modified corn developed by Syngenta. Read More
FertilizerMonty’s Plant Food Brings In New Sales Rep
December 16, 2014
Monty's Plant Food Company has hired Warren Kearns as its newest Sales Representative for the South Carolina area. Read More
EquipmentHagie Wins 2014 CropLife IRON Product Of The Year Award
December 15, 2014
The self-propelled sprayer maker has a hit on its hands with the new STS Series model. Read More
Syngenta
Seed/BiotechSyngenta Sees China Approving Contentious GMO Corn Soon
December 15, 2014
Syngenta will make an announcement when it receives official documentation from China that Agrisure Viptera corn, known as MIR 162, has been cleared for import. Read More
Crop InputsVerdesian Life Sciences Names Vice President Of Communi…
December 15, 2014
Amy Bugg will oversee the execution of all promotional strategies for the corporate brand and the complete product portfolio. Read More
StewardshipFarmers, Retailers Attend 4R Certification 4U Workshop
December 15, 2014
More than 160 farmers and ag retailer attended the “4R Certification 4U” workshop December 12 to learn more about the 4Rs of nutrient stewardship, water quality research in the area and cost-sharing opportunities. Read More
Matt Hopkins10 Best New Agriculture Apps For 2015
December 15, 2014
These new agriculture apps are certain to help ag professionals do their jobs more efficiently in 2015 and beyond. Read More
ManagementARA Learnings, Retail Buying Intentions: Welcome To Cro…
December 12, 2014
This informal video program puts news and events effecting retailers into context, and features Editors Paul Schrimpf and Eric Sfiligoj. Read More
Seed/BiotechMonsanto Herbicide-Tolerant Technology Closer To Commer…
December 12, 2014
The final EIS moves Monsanto one step closer to the introduction of Bollgard II XtendFlex cotton and Roundup Ready 2 Xtend soybeans, paving the way to provide access to dicamba-tolerant soybeans and cotton. Read More
Seed/BiotechUSDA Issues Final Environmental Impact Statement On Her…
December 12, 2014
The USDA Animal and Plant Health Inspection Service (APHIS) is issuing a final environmental impact statement on varieties of cotton and soybeans that have been genetically engineered for resistance to several herbicides, including the one known as dicamba. Read More
CropLife 100CHS: Driving Momentum To Help Farmer-Owners Grow
December 11, 2014
CHS Inc., the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, must capture new opportunities to Read More
LegislationARA Applauds CFATS Passage Prior To Holiday Adjournment
December 11, 2014
The streamlined bill provides a four-year authorization of the CFATS program and guidance to DHS on key issues of chemical facility security Read More
Seed/BiotechBayer CropScience’s ILeVO Approved By EPA
December 11, 2014
EPA has approved ILeVO, the only seed treatment that protects the root system against infections caused by the Sudden Death Syndrome fungus and has activity against dangerous nematodes. Read More
Biologicals in Emerging Markets Map.
Crop InputsBiocontrols Could Quadruple By 2025; Will Regulators Pl…
December 11, 2014
The European experience with GMOs offers caution — and a promise — for biologicals. Read More
Crop InputsBASF Donates $75,000 To Feeding America
December 10, 2014
The donation will support Feeding America’s National Produce Program, an initiative that helps with planning, transportation and logistics to ensure fresh produce deliveries to the 200 member food banks around the country. Read More